2013 Index of Economic Freedom

Taiwan

overall score72.7
world rank20
Rule of Law

Property Rights70.0

Freedom From Corruption61.0

Limited Government

Government Spending84.9

Fiscal Freedom80.5

Regulatory Efficiency

Business Freedom94.3

Labor Freedom53.3

Monetary Freedom82.9

Open Markets

Trade Freedom85.0

Investment Freedom65.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 23.2 million
  • GDP (PPP):
    • $876.0 billion
    • 4.0% growth
    • 3.8% 5-year compound annual growth
    • $37,720 per capita
  • Unemployment:
    • 4.4%
  • Inflation (CPI):
    • 1.4%
  • FDI Inflow:
    • $-1962.0 million
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Taiwan’s economic freedom score is 72.7, making its economy the 20th freest in the 2013 Index. Its score is 0.8 point higher than last year, reflecting gains in labor freedom, business freedom, and freedom from corruption. Taiwan is ranked 5th out of 41 economies in the Asia–Pacific region, and its overall score is higher than the world average.

Taiwan has recorded uninterrupted advancements in economic freedom since 2009 and continues to be one of the world’s 20 freest economies in the 2013 Index. The private sector benefits from a well-developed commercial code, and open-market policies facilitate the free flow of goods and capital. Small and medium-size enterprises have been the backbone of Taiwan’s dynamic economic expansion. Despite the ongoing global economic uncertainty, the country’s average annual growth rate has equaled almost 4 percent over the past five years.

A sound legal framework is in place to provide strong protection of property rights and uphold the rule of law. The level of state involvement in the economy remains considerable, but government spending is under control. Corruption and a rigid labor market continue to hold back Taiwan’s overall economic freedom, although there have been improvements in these two areas.

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Background

Taiwan is a dynamic multi-party democracy. President Ma Ying-jeou, elected in 2008 on a platform that promised a more open economic relationship with China, has moved to relax cross-Strait barriers and has negotiated a formal economic agreement with the mainland. Taiwan remains excluded from membership in the United Nations and other international organizations as a result of efforts by Beijing to pressure it into unification. Although internal opposition to engaging with China is considerable because of fears that sovereignty will be lost, the newly negotiated economic agreement seems to have been helpful in accelerating recovery from the financial crisis. With emphasis on services, technology, and elements of manufacturing, Taiwan’s economy is one of the richest in Asia.

Rule of LawView Methodology

Property Rights 70.0 Create a Graph using this measurement

Freedom From Corruption 61.0 Create a Graph using this measurement

The rule of law is well maintained, and the court system is independent of political interference. Property rights are generally protected, and the judiciary enforces contracts effectively. The legal regime for intellectual property rights has advanced, but there are continuing concerns about counterfeit pharmaceuticals and infringement of copyrighted material. Despite some progress, corruption continues to be a cause for concern.

Limited GovernmentView Methodology

The top income tax rate is 40 percent, and the top corporate tax rate has been reduced to 17 percent. Other taxes include a value-added tax (VAT) and an interest tax. The overall tax burden equals 7.9 percent of total domestic income. Government spending is equivalent to 22.4 percent of GDP. The budget balance has fallen into deficit, and public debt is about 40 percent of GDP. The government has proposed tax reform to close the budget deficit.

Regulatory EfficiencyView Methodology

The overall freedom to conduct business is well protected under the efficient regulatory environment. Simplification of registration procedures has continued in recent years. Bankruptcy proceedings are fairly easy and straightforward. With no minimum capital required, it takes only three procedures to start a company. The labor market lacks flexibility. Monetary stability has been well maintained.

Open MarketsView Methodology

The trade-weighted average tariff rate is competitively low at 2.5 percent, but non-tariff barriers affecting agricultural imports and some service industries add to the cost of trade. Foreign investment is generally welcome, and the overall investment regime has become more transparent and efficient. The evolving financial sector offers a wide range of financial instruments and services, although it remains subject to government interference.

Country's Score Over Time

Bar Graph of Taiwan Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Taiwan to other economic country groups

Regional Ranking

rank country overall change
1Hong Kong89.3-0.6
2Singapore880.5
3Australia82.6-0.5
4New Zealand81.4-0.7
5Taiwan72.70.8
6Japan71.80.2
7Macau71.7-0.1
8South Korea70.30.4
9Malaysia 66.1-0.3
10Thailand 64.1-0.8
11Kazakhstan63-0.6
12Mongolia61.70.2
13Sri Lanka60.72.4
14Azerbaijan59.70.8
15Kyrgyz Republic 59.6-0.6
16Cambodia58.50.9
17The Philippines58.21.1
18Fiji57.2-0.1
19Samoa57.1-3.4
20Indonesia56.90.5
21Vanuatu56.60.0
22Tonga56-1.0
23India55.20.6
24Pakistan 55.10.4
25Bhutan55-1.6
26Papua New Guinea53.6-0.2
27Tajikistan53.40.0
28Bangladesh 52.6-0.6
29China51.90.7
30Vietnam51-0.3
31Nepal50.40.2
32Micronesia50.1-0.6
33Laos50.10.1
34Maldives49-0.2
35Uzbekistan460.2
36Kiribati45.9-1.0
37Solomon Islands45-1.2
38Timor-Leste43.70.4
39Turkmenistan42.6-1.2
40Burma39.20.5
41North Korea1.50.5
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